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Bahrain implements a 5% VAT rate from 1 Jan 2019

Supplies of goods and services by a taxable person in Bahrain are generally subject to VAT in Bahrain at the standard-rate of 5%, unless they are specifically subject to VAT at the zero rate or exempt from VAT.

Scope of VAT

  • Local supplies of goods and services
  • Imports of goods
  • Imports of services by a VAT registrant

Special VAT refund schemes are available.

VAT legislation allows certain persons to obtain a refund of Bahrain VAT incurred on their expenses and import of goods irrespective of whether they qualify as taxable persons or meet the general conditions for input tax recovery.

These are called “Special refund schemes”. The persons listed below can benefit from a special refund scheme:

  • Tourists
  • Foreign governments, international organizations, institutions, consular and military bodies and missions
  • Business visitors from non-Implementing States
  • Taxable persons from other Implementing States

Each special refund scheme follows specific conditions and a specific refund application process.

Further information on these schemes will be published in due course.

Penalties for non-compliance.

  1. Delay in VAT return filing/payment of due tax: Between 5 and 25 percent of VAT payable,
  2. Failure to register within 60 days of the deadline provided for registration: Less than BHD10,000,
  3. Understating the value of imports or supplies of goods and services: Between 2.5 and 5 percent of the unpaid tax for every month in which it is outstanding,
  4. An administrative penalty not exceeding BHD5,000 is imposed for persons involved in the following:
  • Failure to cooperate with the tax authority’s employees in their duties to enforce the provisions of the VAT Law.
  • Failure to disclose to the tax authority changes in the applicant’s registration status or VAT return-related information.
  • Failure to display VAT-inclusive prices on products and services in the local market (retail sales).
  • Failure to submit information requested by the tax authority.
  • Failure to abide by the rules and conditions surrounding the issuance of tax invoices.
  • Violation of any other provision of the VAT Law and VAT Regulations.

Saudi Arabia and The United Arab Emirates became the first countries in the Gulf Region to implement a VAT regime last year. Other Gulf Region countries have been working on following in their footsteps with this new VAT regime.

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